Parliamentary Debates House of Commons Official Report General Committees

PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES

Public Bill Committee

FINANCE (NO. 4) BILL

(Except clauses 1, 4, 8, 189 and 209, schedules 1, 23, and 33 and certain new clauses and new schedules)

Third Sitting Thursday 26 April 2012 (Morning)

CONTENTS

CLAUSE 3 under consideration when the Committee adjourned till this day at One o’clock.

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© Parliamentary Copyright House of Commons 2012 This publication may be reproduced under the terms of the Parliamentary Click-Use Licence, available online through The National Archives website at www.nationalarchives.gov.uk/information-management/our-services/parliamentary-licence-information.htm Enquiries to The National Archives, Kew, Richmond, Surrey TW9 4DU; e-mail: [email protected] 73 Public Bill Committee26 APRIL 2012 Finance (No. 4) Bill 74

The Committee consisted of the following Members:

Chairs: †MR PETER BONE,MR JIM HOOD

† Baldwin, Harriett (West Worcestershire) (Con) † Malhotra, Seema (Feltham and Heston) (Lab/Co- † Barclay, Stephen (North East Cambridgeshire) (Con) op) † Blenkinsop, Tom (Middlesbrough South and East Mann, John (Bassetlaw) (Lab) Cleveland) (Lab) † Mearns, Ian (Gateshead) (Lab) Burley, Mr Aidan (Cannock Chase) (Con) † Mills, Nigel (Amber Valley) (Con) † Elphicke, Charlie (Dover) (Con) † Morrice, Graeme (Livingston) (Lab) † Garnier, Mark (Wyre Forest) (Con) † Morris, Grahame M. (Easington) (Lab) † Gauke, Mr David (Exchequer Secretary to the † Pugh, John (Southport) (LD) Treasury) † Rees-Mogg, Jacob (North East Somerset) (Con) † Gilmore, Sheila (Edinburgh East) (Lab) † Reeves, Rachel (Leeds West) (Lab) † Gyimah, Mr Sam (East Surrey) (Con) † Smith, Miss Chloe (Economic Secretary to the † Hamilton, Fabian (Leeds North East) (Lab) Treasury) † Hands, Greg (Chelsea and Fulham) (Con) † Smith, Owen (Pontypridd) (Lab) † Harrington, Richard (Watford) (Con) † Swales, Ian (Redcar) (LD) † Hilling, Julie (Bolton West) (Lab) Syms, Mr Robert (Poole) (Con) † Hoban, Mr Mark (Financial Secretary to the † Williams, Stephen (Bristol West) (LD) Treasury) † Williamson, Gavin (South Staffordshire) (Con) † Jamieson, Cathy (Kilmarnock and Loudoun) (Lab/ Wilson, Sammy (East Antrim) (DUP) Co-op) † Kirby, Simon (Brighton, Kemptown) (Con) James Rhys, Simon Patrick, Committee Clerks † Lavery, Ian (Wansbeck) (Lab) † McKenzie, Mr Iain (Inverclyde) (Lab) † attended the Committee 75 Public Bill CommitteeHOUSE OF COMMONS Finance (No. 4) Bill 76

proceedings, my hon. Friend the Member for Pontypridd Public Bill Committee highlighted several case studies, and it is right that we should look at the policy’s impact on poorer, working Thursday 26 April 2012 families in receipt of housing and council tax benefits. As he said, they will be just £33 a year better off from (Morning) the tax threshold increase because, as their income goes up, their benefit entitlement goes down.

[MR PETER BONE in the Chair] Graeme Morrice (Livingston) (Lab): To go back to Finance (No. 4) Bill my hon. Friend’s comment about VAT, it seems that earlier this week Government Members were disputing (Except clauses 1, 4, 8, 189 and 209, schedules 1, 23 the figures that we had been given. For example, my and 33 and certain new clauses and new schedules) hon. Friend the Member for Easingston mentioned that an average couple with children would lose £450 a year. Clause 3 Does he accept that the official figures were confirmed by the Minister, fin response to a question asked by my PERSONAL ALLOWANCE FOR 2012-13 FOR THOSE AGED hon. Friend the Member for Gedling (Vernon Coaker), UNDER 65 recorded in Hansard on 5 July 2010? Amendment proposed (24 April): 10, in clause 3, page 2, line 33, at end add— Grahame M. Morris: I believe that it was the hon. ‘(3) The Chancellor of the Exchequer shall review the overall Member for Bristol West who queried the figures that impact on families of this section compared with other measures we were quoting. It is important that we set the record the Government is introducing and place a copy of the review in straight. They are official Treasury figures. the Library of the House of Commons.’—(Owen Smith.)

9am Stephen Williams (Bristol West) (LD): The hon. Question again proposed, That the amendment be Gentleman mentioned my earlier intervention on him, I made. think. The £450 may be true on average across all families in the UK, but the specific point that he and his The Chair: I remind the Committee that we are colleagues were making was that the poorest in society, discussing amendment 10, with which we are discussing particularly people in his own constituency, would be clause stand part. worse off by £450 as a result of the rise in VAT, which, We shall finish this morning’s sitting no later than from memory, would mean that they had spent £18,000 10.25 am, which will enable members of the Committee on standard-rated, VATable items. I challenged him to to get to the Chamber in time for proceedings there. say how many people in his constituency might actually spend £18,000 on VAT standard-rated items. I think he Grahame M. Morris (Easington) (Lab): I rise in support said, “Very few,” so I do not think I was wrong. of amendment 10. In view of the figures published yesterday, it is worth while focusing on the impact on Grahame M. Morris: I refer the hon. Gentleman to ordinary families of the double-dip recession, which the reply quoted by my hon. Friend the Member for has now been confirmed officially. While Opposition Livingston. Members welcome the increase in the general income tax personal allowance—the basic rate, that is—when people first start paying tax, it is important that the Ian Swales (Redcar) (LD): Will the hon. Gentleman overall impact of all policies on low and average income give way? earners is assessed, because the increase in the personal allowance is only part of a package of measures. Grahame M. Morris: If the hon. Gentleman will The question that must be asked is who will be better allow me to respond to the intervention of the hon. off as a result of the changes made in the Budget by the Member for Bristol West, I will then give way. Chancellor? Our amendment is reasoned. Indeed, it calls on the Government to report back to the House on My perception is that ordinary families, such as those the overall impact of their policy on those whom they in Easington, spend the vast bulk of their income on claim will be better off as a result of the increase in the VATable items; they do not save it, buy Ferraris or personal allowance. The long-term objective of raising holiday homes, or put it into pension pots. The figure I the basic personal allowance to £10,000 during the quoted is from the Minister’s response to a parliamentary parliamentary year is to be applauded. In a previous question. debate, the hon. Member for Watford asked whether Opposition Members supported it. We certainly do, but Ian Swales: I am sure that the hon. Gentleman is the measure must be seen in context alongside the aware that there is no standard-rate VAT on housing slash-and-burn policies of other Departments, most and public transport costs, food, children’s clothes, fares, notably the Department for Work and Pensions. insurance, TV, gambling, the lottery, energy or utilities. According to independent experts, the changes coming For me and my household, that is the bulk of our into effect in April will leave a family with children spending. Is he aware that the Office for National worse off by an average of £511 a year. That is on top of Statistics says that someone would have to be in the top the VAT rise, which I remind the Committee will cost an 20% of earners to spend £18,000 on VAT standard-rated average couple with children £450 a year. In earlier items? 77 Public Bill Committee26 APRIL 2012 Finance (No. 4) Bill 78

Grahame M. Morris: That amount was in the Treasury’s As part of that assessment, we need to assess the overall reply to a question from my hon. Friend the Member impact of the whole package of measures net, as my for Gedling, and it is the increase in an average family’s hon. Friend the Member for Feltham and Heston said. expenditure as a consequence of the VAT increase. If Let us not forget that the Chancellor has chosen to keep the hon. Member for Redcar queries the response, VAT at 20%—clearly a regressive tax that hurts the perhaps he should take it up with the Minister. I simply poor most. He has also chosen to continue wage freezes quoted the figure given by the Treasury. throughout the public sector. He has chosen to go down the route of regional pay, an issue that I sought to Ian Lavery (Wansbeck) (Lab): Is my hon. Friend as highlight in yesterday’s debate in Westminster Hall. surprised as me by the two interventions from Liberal Areas such as mine would effectively be turned into Democrat Members, who stood at the election with the low-pay ghettoes. slogan “VAT bombshell” and, with VAT having been increased to 20%, are now saying on behalf of the Ian Mearns (Gateshead) (Lab): The point my hon. coalition how wonderful that increase is? Friend makes is magnified in the context of rebalancing the overall economy. In the north-east of England at the Grahame M. Morris: As might be expected, I completely moment it is very difficult for businesses to get off the agree with my hon. Friend’s sentiments. ground and grow because disposable income has been Earlier, I referred to independent figures from the sucked out the local economy by the depression in local Institute for Fiscal Studies, which I assume Government government wages and jobs, and the depression in Members accept. Those figures show that families with benefits. children will, on average, be £511 a year worse off in this financial year as a result of Government decisions on tax, spending and pay. I am trying, perhaps in a Grahame M. Morris: My hon. Friend makes an laboured way, to raise the issue of opportunity cost. If important point. Depressing demand is having a negative we compare the negligible increase in personal allowances, effect. I do not intend to list the series of private sector which will make some of the poorest even poorer, with job losses that we have experienced in Easington; it is the £3 billion tax cut for those earning more than considerable. We are haemorrhaging jobs at an alarming £150,000, the choices that are being made are stark. rate and that has a negative impact on the local economy and on people’s incomes. Mr Iain McKenzie (Inverclyde) (Lab): My hon. Friend is making a powerful argument for those who are suffering Richard Harrington (Watford) (Con): I would like to most under the Government’s policies. go back to the point the hon. Gentleman made before I ask also that, above and beyond the amendment, the previous intervention, about the proposal for regional the Government look at their policies and the impact pay in the public sector. I have two questions. First, I that they have on those who will not benefit from the was tired when I got home last night so I cannot tax allowance increases—those who are out of work or remember whether it was on “News at 10”or “Newsnight”, do not work enough hours and are having to look for but there was an interview with an employer in south additional hours, which are difficult to come by. Wales, in Ebbw Vale, who was struggling hard to keep a plastics factory going. He could not compete with the Grahame M. Morris: That intervention reinforces my public sector to employ people to work in his factory; point. I remind Government Members that we do not he was losing people to the public sector. What is the seek to amend the increase in tax thresholds. We are hon. Gentleman’s response to that item on the news? simply asking in amendment 10 for a proper review to Secondly, what would he say to my constituent who be carried out, to assess the impact of the change, which complained to me yesterday, having struggled hard to seems completely reasonable. As I mentioned and my set up a business in Watford, that it was difficult to hon. Friend has just highlighted, politics is about priorities recruit people when the local council, which has a and making choices. The Chancellor has chosen to give turnover far less than his business, is paying so many a substantial £40,000 tax cut to 14,000 millionaires. people in excess of £100,000 a year? That choice would not meet with favour in Easington, in much of the north-east or across the country. Grahame M. Morris: I am grateful for that intervention. I am not an expert on the employment situation in Seema Malhotra (Feltham and Heston) (Lab/Co-op): south Wales, but perhaps my hon. Friend the Member Does my hon. Friend agree that one of the most important for Pontypridd is. The issue in the north-east is joblessness, things after a Budget is that families are able to assess not a lack of willingness to take up job opportunities. the impact of the Budget on them and their household In the constituency of my hon. Friend the Member for income? A communication approach of simply talking Middlesbrough South and East Cleveland, 30 jobseekers about one part of the Budget will be insufficient to chase every vacancy. allow families to plan for their needs. We need to understand the net impact and have that transparency. 9.15 am Grahame M. Morris: Absolutely. I thank my hon. Sheila Gilmore (Edinburgh East) (Lab): Does my Friend for that completely reasonable point. I do not hon. Friend agree that the argument asserted by the understand how the Government could argue against hon. Member for Watford would work if there were a that. If their contention is correct, why not have a fair shortage of people looking for work in an area? If there and reasonable assessment of the impact of the measures? were a shortage of labour and a public sector employer 79 Public Bill CommitteeHOUSE OF COMMONS Finance (No. 4) Bill 80

[Sheila Gilmore] My hon. Friend on the Front Bench, the Member for Pontypridd, has added some new words to the dictionary: paid more than a private sector one, there might be an “clever-dickery” was one from the previous sitting and issue. However, when so many people are not working, I the “omnishambles” of a Budget was another. The find it hard to understand that argument. Budget certainly had the longest build-up and perhaps the most leaks of any that I recall. As the implications of the granny tax, the pasty tax, the caravan tax, the Grahame M. Morris: I am grateful for that intervention. corporate tax cut and the top rate tax cut have all been The situation that the hon. Member for Watford illustrates digested, we are now seeing the full implications of the is not one that strikes a chord. From the evidence that I Budget. Scrutinised in detail, it seems to be undergoing have seen from various sources in my region, employers a profound unravelling, probably more than any Budget being unable to attract suitable candidates is not an that I can recall. issue; the problem is a lack of available vacancies. I want to ask the Minister some questions. If Government Members still believe that the Budget is good for lower Owen Smith (Pontypridd) (Lab): I go slightly further and middle income families, and not just good for the by suggesting that it is risible to argue that the reason richest, as the Opposition contend—why do they not why people are failing to employ workers in Ebbw Vale, support our amendment so that the Government can a town I know extremely well, having once stood for provide a proper assessment of the impact of their election there— policies? I am fascinated that the Liberal Democrats have been completely over the top in their support for the rise in personal allowances. We support that drive to The Financial Secretary to the Treasury (Mr Mark lift people out of tax, but they trumpet it as their Hoban): Unsuccessfully. flagship policy. Seema Malhotra: Does my hon. Friend agree that, Owen Smith: Unsuccessfully. Happily, I am now elected when setting out the impact of particular measures, it is in my home town of Pontypridd. I offered myself to the vital that the Government make clear how much will be people of Ebbw Vale, but I was rejected. given to or taken from people, bearing in mind that the I happen to know five or six of the people who were Library has stated that the impact of the personal interviewed last night on “Newsnight”. The notion that allowance changes on the basic rate taxpayer will be £42 the private sector is failing to employ people in Ebbw a year, or 81p a week? Vale as a result of the competition is nonsense— [Interruption.] Grahame M. Morris: I am grateful for that intervention, and I will come on to what would have happened if the Government had not sought to increase the basic rate The Chair: Order. As someone who offered myself in personal allowance. the neighbouring constituency to Ebbw Vale, Islwyn, and lost by 36,000 votes— Charlie Elphicke (Dover) (Con): I thank the hon. Gentleman for giving way. He has been extraordinarily Owen Smith: I only lost by two, Mr Bone. generous in taking interventions from everyone today. In fairness to my hon. Friends in the Liberal Democrat party, the personal allowance increase was in their The Chair: —I understand the argument that Mr Morris manifesto, and it has been supported by many Government is making. However, we cannot have a discussion on the Members, including me, for a long time. The hon. whole economy in this clause stand part debate. I should Gentleman says that the Opposition do not have a appreciate it if we were a little closer to the clause. problem with the proposal, but that was not my understanding of the speech made by the hon. Member for Pontypridd; he spent most of his speech rubbishing Grahame M. Morris: Thank you, Mr Bone. I was it, and saying that it would benefit rich people, rather tempted to return specifically to the subject of the than saying that it was a really great thing that would amendment. I argue that we should make a reasonable look after the least well-off. assessment of the impact of the tax threshold increase on everyone to see whether the Government’s contentions Grahame M. Morris: I thank the hon. Gentleman for that it will be of benefit are correct. We must consider that intervention, but he misrepresents the position of the whole package of measures. I mentioned issues not only the Opposition, but my hon. Friend the Member relating to regional pay. We must also assess the impact for Pontypridd. We welcome the change to the personal of the fuel duty increase, which is a huge bone—no pun allowance, but the point that we are trying to make— intended—of contention. perhaps I am not doing it awfully well—is that we need to look at the whole package of measures. Although we Ian Mearns: My hon. Friend is remiss, because he has welcome the change in personal allowances, we want to not wished good luck to the constituent of the hon. look at the impact on ordinary families and on the Member for Watford in his start-up business, which I economy as a whole. Is it generating jobs and growth? presume is a Ferrari dealership. That is the acid test of the success of the policy. Ian Lavery: I thank my hon. Friend for giving way; he Grahame M. Morris: I do apologise. I wish that is very generous this morning. Does he agree that the constituent every success in his search for employment, personal allowance increase will have no impact whatever in selling Ferraris or whatever it might be. on the people, including at least 1.1 million young 81 Public Bill Committee26 APRIL 2012 Finance (No. 4) Bill 82 people, who are out of work? Does he agree that people would have made substantial progress without any who are not making enough to benefit from the change intervention, just allowing for inflation. The actual cost in personal allowance will suffer even more greatly as a to the Treasury, according to its figures, is £5.3 billion, result of the double-dip recession announced yesterday? and I highlight that the opportunity cost of a tax cut for top rate taxpayers—millionaires and those earning more Grahame M. Morris: That is an excellent point. We than £150,000 a year—is £3 billion. If the Chancellor would like to see specific, targeted measures to help had forgone the 5p tax cut on the 50p top rate of tax, he particular groups, such as people at the bottom end of could have easily afforded to reach the £10,000 threshold the income scale. We want measures to assist the economy next year. That is my simple point. and to bring about growth and jobs. There are better ways of doing that. We will talk about corporation tax Charlie Elphicke: It is a pleasure to speak under your under later clauses. Although we are not resisting the chairmanship for the first time, Mr Bone. I will keep my change in personal allowances, our proposals would remarks brief, as a Government Member should, taking have a more beneficial effect on the economy, and the advice that the Exchequer Secretary to the Treasury would stimulate job creation and growth. gave at the outset of our proceedings. I welcome the increase in the personal allowance. Graeme Morrice: I am grateful to my hon. Friend for Many of us in the Conservative party have campaigned giving way once again; he has been exceedingly generous. for an increase in the personal allowance for many To follow on from the intervention by my hon. Friend years, and I am delighted that my hon. Friends in the the Member for Wansbeck, does my hon. Friend the Liberal Democrats had that in their manifesto. We Member for Easington not take the view, as I do, that in agree with them, and we are implementing the proposal addition to accepting this amendment, the Government to ensure that we look after the least well-off. should review the impact of their policies on all those who are not in work, or are in low-paid work—those Grahame M. Morris: While I welcome the move who will not benefit from the increase in personal towards a personal allowance of £10,000, does the hon. allowance—particularly given yesterday’s news that this Gentleman concede that if the Chancellor had chosen Government have taken us back into recession? Finally, not to reduce the top rate of tax, he could have made does he also agree that although raising the personal progress towards that goal very much quicker, achieving allowance was indeed in the Liberal Democrat manifesto it in perhaps a year or two? and, as we have always said, we do not oppose that measure, it is one of the few manifesto commitments 9.30 am that the Liberal Democrats have honoured, now that they are in government? Charlie Elphicke: No, I would not concede that. First, the amount of money involved is only about £100 million. Grahame M. Morris: I am grateful for that intervention, Secondly, Paul Johnson at the IFS—I know the Opposition and I am pleased that that has been placed on the are fond of the IFS—said, when reviewing the Budget, record. that the experiment with the 50p rate did not seem to have been a success. It was initially intended to be I will respond more fully to the point made by my temporary, and we have made sure that it is temporary. hon. Friend the Member for Feltham and Heston on indexation and the consequence of the uprating. If we look in a little more detail at the normal price indexation Sheila Gilmore: Will the hon. Gentleman also quote of the personal allowance, the assumption underlying the IFS’s comment that after one year, it was far too the Office for Budget Responsibility’s forecasts for the soon to make that kind of judgment? public finances would mean that the personal allowance would reach £8,885 by 2015-16, without any discretionary Charlie Elphicke: The IFS says that there is some policy changes, given the current projections on the rate uncertainty. We may be talking about not a cost of of inflation. £100 million, but a surplus to the Exchequer of £500 million Although we welcome the policy, there is an opportunity as a result of fewer people avoiding the tax, which is cost. Compared with a baseline of £8,885, a personal promising. allowance of £10,000 in 2015-16, which this policy moves towards, would mean that tax revenues for the Treasury would be £5.3 billion lower in that year. The Owen Smith: Will the hon. Gentleman give way? fact that the Chancellor has just committed to spending £3 billion on a few thousand millionaires by cutting the Charlie Elphicke: Allow me to make some progress. top rate of tax highlights that the personal allowance increase is a relatively small gesture to basic rate taxpayers. Owen Smith rose— That is the reality of the rise in the personal allowance.

Charlie Elphicke: I would like to make a little bit of Stephen Williams: The hon. Gentleman is talking progress. I did say that I would try to speak briefly. about a notional increase in 2015-16, but is he forgetting anything that might happen in 2014-15? Owen Smith rose— Grahame M. Morris: The point I am making is that although there will be progress towards the target of The Chair: Order. It is quite clear that the hon. having a basic rate personal allowance of £10,000, we Member for Dover is not giving way at the moment. 83 Public Bill CommitteeHOUSE OF COMMONS Finance (No. 4) Bill 84

Charlie Elphicke: I will give way to the hon. Member smokers. That is not the reality that I understand in my for Pontypridd in due course, but I should like to make constituency. He should reflect on the way he emphasised a little bit of progress. Amendment 10 would require a those particular things. report on the overall impact on families. In looking at the amendment, one needs to look at the mischief that Charlie Elphicke: I do not make that point at all. I is being addressed by the Government. The fiscal tightening would hesitate to make that point. In fact, I believe that is, inevitably, due to the state of the nation’s finances. it was a former Home Secretary—either the right hon. Public sector net debt is 60% because of the massive Member for Kingston upon Hull West and Hessle (Alan mismanagement of the nation’s finances under the previous Johnson) or his predecessor, who was the Member for Government. Over this Parliament, while we are turning Airdrie and Shotts—who some time ago talked about around the supertanker, that will rise to about 76%, how such imposts were hurting working-class people’s because it takes time to bring the nation’s finances little pleasures; some may recall that it was a Labour under control when they are in such a mess. There has Home Secretary who said that. to be fiscal tightening across the board. I am digressing from the central point, which is On the overall impact on families, VAT and indirect simply to point out what the figures say. I am not taxes have been raised. I have had a look at “The effects making any judgment; goodness knows, I gave up smoking of taxes and benefits on household income”—the latest a week ago—I am feeling better for it, but it has been a one, which is for 2009-10. VAT as a percentage of real struggle for me—and I am not in the 20% least expenditure varies across all income groups from 6.5% well-off in this country. I make no pejorative remark to 7%. It is slightly lumpy across all income groups, but about anyone who has vices; as I believe Marcus Aurelius broadly the percentage of income expended on VAT said in his “Meditations”, into every life a little rain seems quite flat. The least well-off paid £995 in VAT. must fall. The rise would be equivalent to about £25, by my calculations. The richest 10% paid £3,745 in VAT—that is a £94 increase as a result of the 2.5% rise—which is a Jacob Rees-Mogg (North East Somerset) (Con) rose— fourfold increase. However, VAT is a sideshow if one looks at indirect taxes as a whole. Charlie Elphicke: My hon. Friend will no doubt correct me. Mr McKenzie: Will the hon. Gentleman give way?

Charlie Elphicke: I will in one moment. Jacob Rees-Mogg: I am happy to confirm that it was Marcus Aurelius who said that into each life a little rain Several hon. Members rose— must fall. I believe he said it in Greek, which I cannot quote. I would like to ask my hon. Friend whether it was the sharp increase in tobacco taxes that encouraged him Charlie Elphicke: Allow me to make this point. The to give up. bottom 20% paid £1,103 in VAT. That is non-retired households, which is as close as one can get to families for these purposes. The total indirect tax paid was three Charlie Elphicke: That was clearly a fiscal incentive, I times as much: £3,318. What are these indirect taxes have to admit. that were preying on low-income families? They were What one needs to look at, with regard to how things like duty on tobacco, which was massively increased hard-pressed families have been getting by, is the whole by the previous Government, and on beer and wine. picture—not just the issue of VAT, but what has happened Fuel duty was massively and outrageously increased with indirect stealth taxes over the past decade or under the previous Government. Vehicle excise duty longer—and how that has put pressure on families. In was massively increased—a poll tax under the previous particular, the fuel duty escalator was a poll tax on Government. There was the TV licence; we know what wheels, and it absolutely crucified many of my constituents, a waste of money that is. Stamp duty was massively and many constituents of Opposition Members. increased under the previous Government. There was also customs duty and betting taxes. All these stealth taxes are the real story. Ian Lavery: A lot of constituents in the north-east would be totally outraged to hear the suggestion that The real story is that what is hitting families is all VAT is a sideshow. With regard to the stealth taxes that these chickens coming home to roost at a time when we the hon. Gentleman mentioned, of which there are have great fiscal difficulties and challenges because of many, can he confirm that his party and the coalition the poisoned legacy of the previous Government. If Government are looking to rescind them? there were to be a report on how families are bearing up as the Opposition request in amendment 10, we would need a bit of impartiality—not just partial figures—and Charlie Elphicke: In due course, I would like that to to look at the issue of indirect taxes across the board. be the case—of course I would; I am a tax-cutter—but No wonder the Opposition pick on VAT when all these right now, we do not exactly have wiggle room in the indirect stealth taxes, which the former Prime Minister public finances, due to the catastrophic mismanagement spent over a decade massively increasing, are twice the of the previous Government. When we consider families, amount of the total revenues from VAT. we need to see the issue in light of the challenges that have been left to us, and how we are trying to manage Ian Mearns: From the way the hon. Gentleman read things to improve families’ quality of life. out his list of duty changes and the impact on poorer When we look at the IFS report on the impact on families, it was almost as though he was characterising families, we need to take into account the impact of poorer families as inveterate gamblers, drinkers and universal credit. I know that the Opposition do not like 85 Public Bill Committee26 APRIL 2012 Finance (No. 4) Bill 86 universal credit, or the idea of making work pay and Julie Hilling (Bolton West) (Lab): Does the hon. encouraging people to go to work—[Interruption.] Well, Gentleman not appreciate that our amendments relate they have argued consistently against it, and have rubbished to the effect of the whole Budget, so they are not only it time and again. about VAT, but about the pasty tax, the granny tax and If we look at the slide from the IFS, we can see that all the other elements of the Budget that affect ordinary the changes that will take effect by April 2014 will help people? He cannot simply say that the previous Government the least well-off, and the impact on them is kept to the introduced all the taxes he mentioned, when in fact absolute minimum. That is important. One has to look indirect taxes increased vastly under the previous Tory at what the Government are doing from a fiscal point of Administration, and are being increased vastly under view across the board, and how that encourages work, this Administration. It is about looking at the picture in helps families and encourages economic growth. the round, and we should absolutely look at other indirect taxation as well.

Graeme Morrice: I certainly take exception to the Charlie Elphicke: I appreciate the desire of the Opposition suggestion that Opposition Members do not support to have a year zero and ignore everything that went making work pay; of course we do. I take the view that before, in a classic Maoist sort of way. That idea has everyone in Parliament supports that position. long pervaded their party; one can see that the spirit of I congratulate the hon. Gentleman on giving up the former Prime Minister is alive and well. Nevertheless, smoking; that is a courageous thing to do, and I know we cannot see things through that prism. We need to that it can be quite difficult. The hon. Member for look at what has happened, where we have come from, North East Somerset suggested that he might have done and where we are going. We will rebalance the economy so because the Government increased tobacco duty to and get a better future for families, and I am confident 36p in the Budget. The hon. Member for Dover mentioned that by the end of this Parliament, families will be much a range of indirect and other taxes that seemed to be the better off than they would have been had the previous fault of the Labour Government, and said that that Government remained in power. We are making changes, added fuel to the fire, so to speak, but does he not including to the personal allowance, to help and look accept that it was a previous Conservative Government— after the least well-off, to make work pay, to help John Major’s Administration—who introduced the fuel families have a better future, and to help unmortgage escalator in 1993? The hon. Gentleman also mentioned, our children’s futures. by mistake I assume, the poll tax. The Exchequer Secretary to the Treasury (Mr David Gauke): It is a pleasure to welcome you back to the The Chair: Order. Two points: first, the intervention Chair, Mr Bone. Following earlier remarks, a thought is too long, and, secondly, although it was absolutely has occurred to me: when, some years hence, the inevitable fair to make the point that Mr Elphicke made, we happens and you are elevated to the upper House, I cannot debate every aspect of it, or we will be here until hope that you can be prevailed upon to take the title next April. Could we try to keep a little closer to the Lord Bone of Contention. I suspect that that is not the clause? last bone pun that we will hear during the Committee.

Sheila Gilmore rose— Charlie Elphicke: Thank you, Mr Bone; I am deeply obliged. Mr Gauke: Indeed, I hope that we shall hear one very When one looks at the impact on families, as the shortly. amendment would require us to do, we need to look at VAT, but we also need to look at other direct taxes. I 9.45 am will finish by saying that according to the ONS report, Sheila Gilmore: No, puns are not my forte, but is the VAT is £1,103 a year for the least well-off in society—the Minister coming out against House of Lords reform? bottom quintile—and total indirect taxes are three times that amount, at £3,318. Perhaps I chose my words badly when I said that VAT was a sideshow. My central point Mr Gauke: Whether or not the House of Lords will is that it is one third of total indirect taxes. The other exist in its current form, I have no doubt that you, taxes—the two thirds—have massively increased. Mr Bone, will be elevated to the nobility in one form or another. I only hope that a peerage will be sufficient. For the richest in society, VAT is something along the lines of £3,410, whereas total indirect taxes are about Clause 3 supports the Government’s continued aim £8,000. The way that the impost works leads to a pretty of creating a fairer tax system by rewarding the efforts similar picture across society and all families. We need of those who choose to work, and supporting millions to look at other indirect taxes. The Opposition should of taxpayers. The clause increases the personal allowance look at their part in massively increasing those taxes by £630 in cash terms, from £7,475 in 2011-12 to £8,105 and burdening families during their period in office. in 2012-13. They should accept some responsibility for that, for wrecking the nation’s finances, and for the fiscal tightening Ian Lavery: The language quite often used is that that we need across the whole of society. We do not people who “choose” to work will benefit. What about want to do it; we would like to cut taxes, but we are in people who would love to work, but do not have the the invidious position of having to apply fiscal tightening opportunity to do so? The Office for National Statistics to families and everyone else due to the complete chaos said that in my constituency only two months ago, that the Opposition left behind. 55.5 people were after each jobcentre vacancy, while the 87 Public Bill CommitteeHOUSE OF COMMONS Finance (No. 4) Bill 88

[Ian Lavery] fail to do that, the consequences for the UK economy would be devastating because of the uncertainty that Library says that 22.2 people are pursuing each jobseeker’s would be created and the higher interest rates that opening. The Minister continually uses the language of would follow. The Government will stick to our task. people who wish and choose to work, but what about people who cannot work and do not have the opportunities Owen Smith: I have a simple question: in the light of that we all want them to have? yesterday’s growth numbers from the ONS, how is the project of reducing the deficit going? What would the Mr Gauke: The point is that it is vital that we have Office for Budget Responsibility predict the deficit to work incentives and that people are better off working be, as a proportion of GDP, by the end of this spending than not, which has not always been the case. The period? Will it be up or down? fundamental reform of the welfare system will ensure that that happens, and the Government are proud to Mr Gauke: The hon. Gentleman will be aware that deliver it. I recognise the hon. Gentleman’s concern: of the OBR last month predicted the state of the public course we all want to reduce unemployment. On that finances. He will also be aware that this week, we front, it is pleasing that the last set of numbers were at received figures on the public finances that were entirely least moving in the right direction. None the less, we consistent with the OBR’s predictions, and he will know face a problem. At the height of the Brown boom, when that the OBR’s independent forecasters all say that the economy was growing quickly—we now know that borrowing is falling, year on year on year. was unsustainable—the country still had 5 million people on out-of-work benefits. That is not something the country can afford, and to address it, we need to ensure Owen Smith: Perhaps I misheard. Did the Minister that work pays. Raising the personal allowance and just say that yesterday’s figures on growth were entirely reducing the tax on low-paid workers is something of consistent with the OBR’s predictions? There were not; which the Government can be proud. they were 0.5% out.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co- Mr Gauke: No. It may have escaped the hon. Gentleman’s op): Will the Minister provide some more information? notice, but figures on public finances also came out this He has talked about the need to make work pay. He will week, which were entirely consistent with the OBR’s know the concerns of those who will lose their working predictions. Altogether, the increases introduced by the tax credit, and who, despite the increase in the personal Government will take 2 million more individuals out of allowance, will still be worse off. When will the Government tax from April 2013 that the previous Government’s make available the figures on the number of people who plans would have done, and benefit 21 million basic rate will now be worse off continuing to work than if they taxpayers by about £170 a year in real terms. Amendment left work and claimed benefits? 10 would require the Government to publish a comparison of the effects on families of the personal allowance increase, together with other measures that we have Mr Gauke: The hon. Lady will be aware that the announced. working tax credit regime we inherited had a requirement that couples, in their aggregate total, worked 16 hours before they qualified. We think it is perfectly fair that Ian Swales: As a new member of the Committee, I the aggregate minimum total for couples should be find it extremely useful to have a huge pile of analytical 24 hours. There will be a behavioural change as a documents on the Budget, including the section on the consequence, and it is a fair policy. impact on households in the Red Book, and another document with six separate impact assessments, including Increasing the personal allowance will lift an additional one on individuals and households, of every policy. Is 260,000 individuals out of tax altogether and give 25 million that less or more information than would have been taxpayers an average real-terms gain of £42 a year. The available in previous Finance Bill Committees? Were increase we are discussing is for 2011-12, and there will such clauses common in Finance Bills under the previous be a greater increase next year. The clause represents the Government? As a new MP, I do not know whether next step towards meeting our long-term objective of they were. increasing the personal allowance to £10,000. At the Budget, the Chancellor announced a further step—a £1,100 increase in the personal allowance in 2013-14, Mr Gauke: I am grateful to my hon. Friend for his which is the largest ever cash increase in the personal excellent intervention. He made a good point. The allowance. essence of the arguments made by several Opposition Members is that the Government should publish information so that we can look in the round at the Mr McKenzie: The Minister is identifying the long-terms various changes. Obviously, they do not want to talk plans of the Government. What effect will the double-dip specifically about the personal allowance. I am still not recession that we are now in have on those long-term entirely clear whether the Labour party supports the plans? increase in the personal allowance. However, it is a reasonable argument that all measures should be looked Mr Gauke: What we will not do—I am sure that I at in the round. shall return to this several times during Committee—is What rather surprises me is that Opposition Members abandon our prudent attempts to reduce the deficit in do not seem to have noticed Annex B of the Red Book. order to get our public finances back on a sustainable We have reduced the size of the Red Book by roughly footing, given the mess that we inherited. Were we to half, so there is perhaps a greater opportunity for people 89 Public Bill Committee26 APRIL 2012 Finance (No. 4) Bill 90 to read what we actually publish. Annex B deals with Mr Gauke: Let me quote paragraph B.21, which the central concerns that hon. Members have expressed, addresses that specific point. Addressing all the issues and I am delighted to see them turning to that part of that affect this group, it says: the Red Book. I shall walk them through it. The first “Taken together, it is estimated that the reduction in the sentence of Annex B, on page 89, states: additional rate of income tax to 45%, the 25% cap on income tax “The Government has taken unprecedented steps to increase reliefs above £50,000 and the increase in stamp duty rates for high transparency and enable the effective scrutiny of policy making value properties will result in an expected average contribution to by publishing detailed distributional analysis of the impact of its the Exchequer from those with incomes of above £150,000 of an reforms on households.” additional £1,300 a year.” My hon. Friend the Member for Redcar is right to That rather reinforces my point. say that such distributional analysis was not previously Let us turn to Annex B. The essence of hon. Members’ available. I remember the 2007 Budget announcements, argument is that we need to see the cumulative impact including the doubling of the 10p rate, and how difficult of the tax, tax credit and benefit changes across various it was to get distributional analysis of that measure and income deciles. Chart B.1 shows the cumulative impact others. of modelled tax, tax credit and benefit changes in cash terms by income deciles. That analysis shows that in absolute terms the top decile sees the largest reduction Owen Smith: Will the Minister give way on that in income. Chart B.2 presents the cumulative impact of point? modelled tax, tax credit and benefit changes relative to net income, and shows that, as a percentage of net Mr Gauke: Perhaps the hon. Gentleman will explain income, reductions in income remain greatest for the why that was so difficult. top decile. Then we turn to charts B.3 and B.4, which show that cash reductions in income for the bottom expenditure decile are less than a tenth of those for the Owen Smith: I do not intend to explain that, as I was top expenditure decile and, as a percentage of expenditure, not in the House. I was going to perform my duty as an the top expenditure decile sees the greatest reduction in Opposition spokesperson and question the Minister on income. his policies. I have read Annex B and think it an The Government sympathise with the essence of the interesting addition to the Red Book. Will the Minister argument that we should provide information and a full explain why Annex B, in its distributional analysis, fails analysis, which is why we have taken unprecedented to include the impact of cutting the 50p rate to 45p? It steps to provide more information, including a breakdown fails to include the impact on the richest deciles in the of income deciles. That is why amendment 10 is unnecessary. country. I thought it strange that it was not seen fit to The Government are committed to providing taxpayers include that. with more information, not only in Annex B but, as the Chancellor has announced, by issuing tax statements so Mr Gauke: I can give an explanation for that. The that individuals can see their income tax and national Red Book and all the numbers in it are signed off by the insurance contributions, and where that money is spent. Office for Budget Responsibility. The OBR thinks it is a We are taking steps to provide taxpayers with much sensible and reasonable forecast to say that the cost of more information, so I hope that the hon. Member for reducing the 50p rate is £100 million, but that is outweighed Pontypridd will withdraw his amendment. more than five times by other measures that will be levied on the wealthiest. On average, the wealthiest will 10 am be paying £1,300 more in tax every year. The Budget in I have one further observation on today’s debate, in fact increases the amount of tax that will be received which hon. Members have made a number of impassioned from the wealthiest. That might give an explanation. speeches on Government policies and the changes to the welfare system. The hon. Member for Pontypridd Owen Smith: Will the Minister give way one more read out a long list of Government policies in that area, time, because what he has said does not really spell it although he gave no indication of whether he supports out? or opposes any of those measures. During proceedings in this Committee and the Committee of the whole House, concerns have been Mr Gauke: I will give way one more time, if the hon. raised about the impact of some of the Government’s Gentleman wants to persevere with that argument. changes on the poorest. We have heard concerns about the impact of changes to working tax credits for people Owen Smith: I will do so happily. That is not what earning £20,000, £30,000, and so on. We have heard Annexe B says explicitly. What it says explicitly is that concerns expressed by Opposition Members about marginal including static costs would be an enormous change, rates for people earning £42,000, £41,000, and so on. and would make a radical shift to the pattern, and There has also been opposition to changes that will would show great benefit. All the other changes included mean that those earning the top 10% of incomes no are largely static costs, not ones that factor in the longer receive child benefit. In passing, there has also behavioural impact. The behavioural impact is enormous. been opposition to the cap on reliefs that will result in The information is at the top of the page that the some of the wealthiest people paying more income tax. Minister is looking at. The difference essentially reflects I gently remind Opposition Members that we face the the Government’s belief that the uncertainty around the most enormous deficit—when we came into office, we behavioural impact is so enormous that they did not see faced the biggest deficit in our peacetime history—a fit to include it. larger deficit than almost any other major economy. 91 Public Bill CommitteeHOUSE OF COMMONS Finance (No. 4) Bill 92

Yet during this debate we have heard opposition to more borrowing. The Government will not take that measures that affect the poorest, those on medium approach. We are going to ensure that we get the public incomes and those on high incomes. I sometimes wonder finances under control. how the Opposition would reduce the structural deficit, given that they oppose every single measure that is Graeme Morrice rose— proposed—I have to make that point to Opposition Members. There is no acceptance, no realisation, of the need to reduce the deficit. Mr Gauke: I will give way one more time and then conclude my remarks. As Annex B shows, we have taken steps to reduce the deficit. The reality is that the biggest contribution is coming from the highest earners, and the reality is that Graeme Morrice: The Minister says that we cannot we have been able to find, even within the constraints, solve the problem of the deficit by borrowing more, but the money to increase the personal allowance in a way is it not the case that the Government are going to previously unseen, taking millions out of tax, reducing borrow another £150 billion, over and above what was the burden on 25 million people and benefiting basic initially planned? rate taxpayers. That is something of which the Government can be proud. Mr Gauke: The hon. Gentleman ought to be a little careful with the statistic that gets thrown around. Borrowing Seema Malhotra: There will be further debate about is falling every year in this Parliament. That is an whether those at the top are giving more in absolute important point to make. terms or in proportionate terms. Does the Minister I am delighted that we have been able to take steps to agree with the independent figures produced by the IFS increase the personal allowance in spite of the difficult that show that families with children will be, on average, state of the public finances. The Government have £511 worse off in this financial year because of the demonstrated their commitment to helping the low-paid, Government’s decisions on tax, spending and pay? and I beg to move that the clause stand part of the Bill.

Mr Gauke: The IFS analysis makes certain assumptions Owen Smith: The phrase “cloud cuckoo land” has about the uprating of benefits. Given some of the steps been bandied about in recent weeks. I am tempted to that we have taken with regard to child tax credits, we start by saying that the Minister may not be living in are doing what we can to protect families. For example, cloud cuckoo land, but he is certainly not someone who I can point to the £7.2 billion for the fairness premium got up this morning and read the newspapers or went to support the poorest in the early years and at every home yesterday evening and watched “Newsnight”. If stage of their education, through free education and he did watch it, it should have come screaming home to care at age two, funding for a pupil premium for school-age him that things were not going swimmingly for the pupils, and a new national scholarship fund to support Government as they sought to tackle the deficit and students in higher education. deal with the economic aftermath of the global recession We have also protected funding for Sure Start services. that we and other nations across the world faced, and We are introducing a new system of flexible parental that the decisions that the Government were taking in leave so that fathers and mothers can share the child respect of ordinary families were not working. They are care work load differently if they wish. We are protecting not working for the economy and not working for the average family as best we can. I must remind hon. individuals. Members that we faced the most enormous deficit. We The Minister asked a moment ago how the Opposition have to get the deficit down, and that involves taking could draw attention to the changes that I highlighted tough decisions. I appreciate the fact that the Opposition earlier and the changes in the fortunes of ordinary do not like doing that, but it strikes me that there is no working families in this country that my hon. Friends section of society for whom they are not prepared to lamented in their speeches yet not understand that all of stand up and say, “No, this group much not be touched.” those concerns needed to be subjugated to the national interest of reducing the deficit by cutting spending. Ian Lavery: The Minister makes an eloquent speech What were we arguing that we should be doing differently? explaining that all the changes are necessary because of As I told the Government Whip, I can answer in one what happened under the previous Government. Is it word: growth. Growth is what we would deliver. Growth not a fact that we are now in a double-dip recession? is what is required to mitigate the need for some of the The Minister’s contribution seems to suggest that we austere, draconian self-defeating measures that are being have a wonderful way forward. In fact, we are moving undertaking by this country. If the Minister wants to backward. We are in a double-dip recession and we are get up and tell us why growth is not occurring, I shall be moving back to the ’70s and back to the ’30s, and extremely grateful. people are suffering greatly as a result. Instead of explaining how well we are doing, why not accept how badly the Mr Gauke: The hon. Gentleman will be aware that we Government have done in terms of the economy, jobs have a very substantial structural deficit. Would he like and growth over the past two years? That is very important to share with the Committee how he would define a to the people out there. structural deficit and why simply saying “growth” does not quite address a structural deficit? Mr Gauke: The hon. Gentleman always speaks with great passion on these matters, but the long-term benefit Owen Smith: I will not bandy about tedious phrases to our economy will not be achieved by abandoning with the Minister. We could engage in a semantic discussion, deficit reduction. We will not solve a debt crisis with and I have no doubt that the Minister would be extremely 93 Public Bill Committee26 APRIL 2012 Finance (No. 4) Bill 94 pleased, and possibly relieved, if we did. But we do not Owen Smith: The complacency and arrogance beggar need to do that because we can rely on hard facts as belief. opposed to semantic discussion. We can look at the numbers; they are very clear. On growth, the OBR Ian Mearns: I think that the hon. Member for Dover forecast for quarter 4 is a 0.1% reduction; out-turn urges caution in using ONS figures, because the small 0.2%. For quarter 1, the OBR anticipated a 0.4% increase. print states that revisions to Office for National Statistics What did we see yesterday? We saw a 0.2% decline. estimates can go down as well as up. Practically every sector of the economy is shrinking apart, ironically, from Government spending, which was up 0.4% in terms of productivity across the quarter. Owen Smith: The estimates have been broadly right. First, it strikes me as amazing that the Government are We know what the facts are. We know that the reduced to blaming the eurozone, which has grown Government have flatlined the economy ever since they more strongly than Britain during the period of this came to office. We know the judgment that is being Government. Secondly, several times in the past 24 hours passed on them. That is not just by the Labour party, I have heard cheerleaders for the Government suggest not just by commentators but by just about everybody that the underlying data will show that there is underpinning out there, including sectors of the commentariat that growth and that the ONS figures are wrong. They are normally would be expected to support the Conservative the official statistics produced for the Government, and party. For example, The Daily Telegraph this morning we ought to rely on them. They have not been revised states: radically. Frankly, even if they were revised by the “By swinging the axe in the wrong places on public spending, maximum amount, which the hon. Member for Dover the Chancellor risks further years of stagnation… there has been will know is 0.2% up, what would that show? It would lamentably little sign of progress… Embarrassingly for the Coalition, show that the economy did not grow at all in the past the present period of stagnation dates almost exactly to the start of its austerity programme.” quarter and that it had not grown by minus 4.1% as opposed to minus 4.3% over the period since his I quote that because I think it makes the very clear Government came to office, which is hardly a badge of point that politics and economics are always about commendation. choices. There is never a period when there is nothing that can be done; when there is no change in policy that can be made and no turn in the road that can be taken. Grahame M. Morris: My hon. Friend makes an excellent Yet that is increasingly what we are being asked to point. Will he remind the Committee what the growth believe by the Government: there is nothing else they level was when Labour left office? Was it 2.8%? can do; there is only the one course; there is only the one club in their bag that they can continue to thrash at Owen Smith: It was, and it was rising, and unemployment the turf, with clods flying everywhere apart from in the was falling. A tentative—let us be no more bullish than direction of growth. that—recovery was under way. The data were heading That is not just our view. It is a view that is becoming in the right direction; they have gone south on this entrenched across the country. Interestingly, the Daily Government’s watch and are continuing to do so. The Mail, another Tory-supporting newspaper said this net consequence is that the deficit, as a proportion of morning: gross domestic product, will continue to grow, as it had “What is most troubling, however, is the way ministers complacently grown at the time of the previous OBR announcement. shrugged their shoulders”— The flatlining increase in 2014-15 led to a predicted deficit rising from 2.1% of GDP to 4.5% of GDP. This I did not see a shrug a moment ago, did I?— year’s recession will have the same impact, which is why “blamed the downturn on the tumult in the debt-ridden eurozone I asked the Minister what he thinks the deficit will be as and suggested that… there is little more they can do. This simply a proportion of GDP at the end of the whole spending isn’t true.” period. Inevitably, it will be higher than the 4.5% predicted That is the view of the Daily Mail and it is a view that I by the OBR, because the economy has continued to share this morning. Growth is what we need, not defeatism. flatline. [Interruption.] I know, I never thought those words would ever pass my lips. There is a first time for everything I return from that aside to the amendment, which is in life, and today I find myself at one with the readers of about transparency and trying to ensure that we have an the Daily Mail. The brothers of Tunbridge Wells and I accurate, holistic picture, in the round, of the impact of are at one—with the TUC, too. the Government’s policies. The Minister suggested that Annex B to the Red Book provided such a picture. Annex B is a useful addition, and it is good that the 10.15 am Government provide that level of detail, but they could Charlie Elphicke: I caution the hon. Gentleman against go far further. They could acknowledge that there are throwing the ONS figures about too much, because deficiencies in how they have presented the data and in they are subject to revision, and many other business the volume of data that is presented. Our amendment data indicate that after that revision, it may well turn presses the Government to be more transparent in how out that we have not been in a double-dip recession. In they go about doing that, because, in essence, the data addition, the OBR indicates a sharp rebound in quarter that are captured in tables B.1, B.2, B.3 and B.4 in that 3, which might be sharper still if the eurozone crisis is annex present a static picture of the cumulative impacts resolved, because business investment, which the OBR of tax over this Government’s period in office versus says has been held back, is likely to take off. The some of the benefit changes. The reason why that is Opposition would be wise not to make too much out of important is that it is why, in the latest version of the the situation, because they may look a bit daft in a few Red Book, they chose not to include the impact of the quarters’ time. 45p rate cut, because to do that would completely blow 95 Public Bill CommitteeHOUSE OF COMMONS Finance (No. 4) Bill 96

[Owen Smith] out. That is except, of course, the rich. For the richest decile, the line would go up at the end if the 45p rate cut a hole in their argument that the richest were paying was included, as opposed to plunging down in that most, both in cash and proportionally. It would blast dramatic fashion. What it hides is that everybody is them beneath the Plimsoll line and that is why they do worse off, just as I have been saying all along. Those not include it. The second thing that the statistics do people at the bottom end of the income spectrum are not show is a proportional impact. While they may worse off than those in the middle. show the impact in cash or in absolute, as my hon. Friend the Member for Easington said earlier, they do Charlie Elphicke: You did that. not show proportionally how families face a disbenefit down the income scale as a result of these changes. Owen Smith: It is about choices, as I said earlier to hon. Members on the Government Benches. We could Ian Mearns: Has my hon. Friend seen any real evidence be growing the economy and we could be taking different that the people who do as much as they possibly can to decisions. We could, for example, be doing what America avoid paying the 50p rate will do any less to avoid a 45p has done and adopting a far more balanced and sensible rate? approach to deficit reduction. What would have happened? I suggest that we would have seen exactly what they Owen Smith: Again, that was the most laughable have seen in America: growth up 2.8%, as opposed to argument that I have heard in this place since I came in. 4.3% down over the spending period. The Committee does not need me to make the argument, because the Secretary of State for Business, Innovation Mark Garnier (Wyre Forest) (Con): My apologies, and Skills made it himself when he was in opposition. Mr Bone, if I return to an earlier part of the hon. The notion that people will suddenly decide to work Gentleman’s speech. He quoted The Daily Telegraph.I harder and pay their taxes with more vigour and not have just found the article, because modern technology salt it away in a bolthole somewhere in a Caribbean is helpful. I will read a little further on. It states: island is frankly nonsense. “Yet dire though the situation is, it’s important to keep a sense of perspective. To think that the mess the UK economy finds Stephen Williams: Will the hon. Gentleman give way? itself in is the result of government actions over the past two years is to descend into fantasy.” Owen Smith: I would be delighted to take the hon. Gentleman’s intervention in a moment, but I hope that Owen Smith: I did suggest that it might be too much he will quote the Laffer curve back to me, because I to imagine that I was entirely at one with the Daily would love to debate that some more. Mail. Clearly it is partially correct, but partially talking through its hat—same as usual. Stephen Williams: I am sorry to disappoint him and for the benefit of the Government Whip, I will be brief. Mr McKenzie: The only fact I see here is that the Does the hon. Gentleman think that it was laughable to constituents come to my hon. Friend and me week after reduce capital gains tax from 40% to 18%, as happened week and say that they are now finding that their hours under the Labour Government? are being reduced, that they are going to part-time hours and that their benefits have been reduced. I will Owen Smith: There is an interesting argument about dearly try to show them these lovely graphs and tell capital gains tax and perhaps when we come on to the them that indeed they cannot be feeling the pain or the clauses that relate to it, I will engage in that argument. I restriction in income that they are receiving. I suspect do not think that it would be in order to discuss capital that the only thing that they will offer— gains tax at this juncture, but I will happily do so at a later stage. 10.25 am The third thing to say about the tables that are The Chair adjourned the Committee without Question included in Annex B is that their overall message, for all put (Standing Order No. 88). that the Minister prayed in aid, is clear: everybody loses Adjourned till this day at One o’clock.